Why fuss over Petrol Price Rise ?

It’s good that the finance minister has clarified that the government doesn’t intend to slap a cess on income and corporate taxes to tide over the oil crisis… Crude prices are at an intimidating $127-a-barrel… Its nothin less than an international crisis… as economies across the world face the threat of galloping inflation and likely recession… India can’t hope to buck the trend and sleep over the unprecedented rise in oil prices… But the government has so far refused to raise domestic prices for petroleum products… Instead… it has allowed public sector oil companies to absorb the shock… If the trend continues, these companies will go bust.

The simple solution to end the crisis… which is applied in the case of almost all commodities… is to allow retail prices of petroleum products to reflect the international situation… The cost of petrol in particular should go up by over Rs 20 per litre… if the government allows the market to reflect international prices… This being an election year… the government, already smarting under a series of electoral defeats and soaring inflation, doesn’t want to risk a petrol price rise… Instead, it is thinking of indirect measures to absorb the price differential… The government is looking for a political solution to what is essentially an economic problem…

Oil is an essential commodity, agreed… But we need to recognise that it doesn’t come free… Political parties that are opposing a hike in oil prices should accept that there are no free lunches… The government should raise petrol prices and continue to keep kerosene and diesel prices relatively low to contain inflation… Of course… it is unrealistic for the government to reflect global crude rates in retail prices… it will have to be a slew of measures that are politically, economically and morally sound… The Left has argued that the government should cut duties and make up the price differential… This argument is valid to some extent only… But the duty cuts have to be reasonable…  A fall in revenues would mean less money for welfare schemes… Is that acceptable ??? Who is the Left shielding when it opposes fuel price hike ??? Should the interests of the vocal middle class alone override the economic concerns of the entire population ???

A sharp increase in the price of petrol and a reasonable cut in duties are necessary to tide over this crisis… The government should not be scared at the prospect of the opposition taking to the streets on the issue… Worse could happen if the government fails to act now… Global prices have cooled off in the past few days, though it is too early to confirm a trend… If they do decline in a few months, the government can surely pass on the benefits to consumers by lowering the petrol price… Meanwhile, can the opposition desist from populist gestures and maintain calm in the face of a national and international emergency?  I doubt…


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